Armstrong Watson advises on 'Patent Box' - an exciting new Tax Relief

HM Revenue & Customs has been consulting with tax advisers on an exciting new tax relief, the ‘Patent Box’.

Steven Holmes, tax consultant at Armstrong Watson, says, “Broadly speaking, the ‘Patent Box’ will be a reduced corporation tax rate for income generated from patents. Any company subject to UK corporation tax will only pay tax at 10% on their net income received from the patent as long as the company is actively involved in the exploitation of the patent. Rather than a simple 10% rate, there will be an ‘effective’ 10% achieved by applying a calculation to reduce profits to a level where they are effectively 10%.”

“The relief falls under the government’s ‘Corporate Tax Road Map’ to stimulate the economy by incentivising innovative high-tech companies to locate in the United Kingdom and will be phased in from 1 April 2013.”

Steven adds, “Although there are some limitations to the relief, such as its compliance burden, it will provide significant tax savings for high-tech research and development and manufacturing companies. This, in theory, should incentivise more companies to locate in the United Kingdom and companies that are already located here to further develop their research and development functions and to register more patents. The government forecasts that the relief will generate tax savings of £500 million in 2013-14, £800 million in 2014-15 and £900 million in 2015-16.” This new regime, together with the forthcoming improvements to the R&D tax relief regime, is welcome news for innovative companies.

Steven’s advice is, “If your company may be eligible for the preferential ‘patent box’ relief you need to ensure you have the patent income structured to benefit from these large projected tax savings.”

 If you have any queries regarding the ‘Patent Box’ or think you might be eligible to make a claim please contact Steven Holmes at r&d@armstrongwatson.co.uk

For more information about R&D tax relief visit the Armstrong Watson website:
http://www.armstrongwatson.co.uk/industry/research-development

 

If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletter

Subscribe

Get in touch

To find out more about how we can help you or your business, call us on 0808 144 5575 and speak to a member of our team. Alternatively use our contact form to send us a message or arrange a callback.

CALL 0808 144 5575

or

Contact Us

All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.

Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.

Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW

Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW